The AI feeding frenzy saw Nvidia’s stock gain 171% last year and kept powering upwards into early January, consolidating its position as the world’s most valuable company.
But today’s rout wiped US$590b ($1.03 trillion) from Nvidia’s market value – the biggest one-day hit in Wall Street history, at least in non-inflation-adjusted dollar terms.
Nvidia’s market cap fell to US$2.9t, pushing it into third place behind Apple and Microsoft.
In its most recent portfolio disclosure (June 2024), the NZ Super Fund said it owned 7,856,082 Nvidia shares – which would have been worth around $2.09b on Friday and $355 million less today.
The question now is whether DeepSeek has triggered the start of a months-long correction in the price of AI-related stocks and tech stocks in general – or whether the deep freakout over DeepSeek will dissipate overnight.
The Wall Street Journal and others have noted that, so far, there’s little hard evidence of DeepSeek’s vaunted ability to be trained at ultra-low cost, using fewer chips and the geek set is arguing over whether it’s truly open source. But against that, many have seen AI stocks as being in a bubble (Nvidia is doing extremely well – its net profit increased 16% over the past quarter and 109% year-on-year to US$19.31b in the three months to October 27, 2024 – but arguably not US$3t worth of well in a world where AI faces potential energy constraints).
Investors can’t spread their bets by buying into DeepSeek; it’s owned by a Chinese hedge fund called High Flyer.
The NZ Super Fund – and Big Tech-heavy KiwiSaver growth funds – will be keeping a wary eye on the other members of the so-called Magnificent Seven, where the news was mixed today.
Google parent Alphabet was down 4.0%. Microsoft – the major backer of ChatGPT maker OpenA – was down 2.1%.
Tesla was down 2.3%. (While CEO Elon Musk has talked up the potential of AI to drive growth at the EV maker – particularly with coming robo-taxis – its recent fall away has been more tied to Trump’s executive order calling for an end to EV subsidies, or at least discussion on that point).
Shares in Amazon – which has a major stake in AI firm Anthropic, maker of the Claude generative AI – were flat. Claude could take a hit from DeepSeek, but the generative AI forms a relatively small part of the tech giant’s business.
Apple actually climbed 3.3%. Some analysts saw DeepSeek’s emergence as a validation of Apple’s decision to develop its own chips in-house to power its Apple Intelligence.
Meta shares were also in the green. The owner of Facebook, Instagram and WhatsApp and the developer of the open-source Llama large language model was up 1.9%. Some have seen the company overspending on AI development. Its CEO Mark Zuckerberg said in a Facebook post on Friday his firm would spend as much as US$60b to US$65b on AI this year as it builds a massive new data centre and develops a new version of Llama. Analysts said DeepSeek illustrated that AI could be developed on a more cost-effective basis.
In its most recent portfolio disclosure, the NZ Super Fund had 2,216,984 shares in Microsoft worth $1.63b; 4,512,851 shares in Apple worth $1.56b; 3,280,616 shares in Alphabet worth $984m; 2,491,984 shares in Amazon worth $790m; 640,325 shares in Meta, worth $529m; and 687084 shares in Tesla worth $223m.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
